Nasty Gal: Fashion's New Phenom Converts 'Likes' Into Sales

"We'll make your brand cooler": Amorusos website is on track to quadruple sales this year.

Ten young women dressed in a catwalk-ready mix of denim fringe vests, short shorts, neon sheer tops and 5-inch platform boots are clustered in a downtown Los Angeles conference room on a recent morning. They take turns doing introductions in between bites of Starbucks pastries. I am superstoked to be here and am definitely a Nasty Gal, says Kelly, a clinical psychiatrist. A recent USC grad chimes in: I love what Nasty Gal has done for me.

Which is nothing compared with what Nasty Gal has done for 28-year-old founder Sophia Amoruso. In four years her spunky retail fashion site has streaked across the Web, pushing new ways to sell trendy but inexpensive clothing. The company is on its way to quadrupling sales this year to $128 million, racking up gross margins of more than 60%, up there with retails most profitable ventures. Nasty Gal has done this with very little advertising and nearly no ­discounting in an industry forced to succumb to daily dealmaking. Instead, Amoruso has built a brand on the backs of Instagram, ­Tumblr, Twitter and Facebook--and translated likes into sales.

Amoruso is slumped in a chair at the end of the table in a fitted black chiffon dress paired with chunky, white lace-up shoes and bright pink lipstick. The girls in the room are hanging on her every gesture. Her trajectory is a fashion girls dream come true, but her story is largely unknown outside her fan base. For all of Nasty Gals constant online conversations with customers--the company updates its social network pages five times a day and aims to get dressed with them every morning--Amoruso is notably quiet, even shy. Do you guys work out? she inquires near the end of the session. Heads bob in agreement before a flurry of passionate pleas imploring her to take on the current athletic apparel giant Lululemon.

This is Nasty Gals first real focus group, prompted by the upcoming launch of a line Amoruso designed herself. Shes stunned to hear shoppers parrot what shes tried to infuse into ripped halter tops and chain mail cutoff shorts: empowering and fierce, sexy just for me. After the group leaves she muses, Its as if they read my mind. I never use those words publicly, but I am always thinking them.

Amoruso has bucked fashion trends not so much with the styles she sells (which can be found elsewhere, often at lower prices) but in the machine shes built to sell them. Nasty Gal buys only limited runs so as not to get stuck with stuff that wont move. It sells 93% of its inventory at full price in an industry that usually marks down a third of all styles. Amoruso refuses to do even the standard gimmicky marketing plays, such as discounts for friend referrals.

She hasnt had to. Nasty Gal has the sticky online metrics of a fashion magazine. A quarter of its 250,000 customers visit the site once a day for at least seven minutes. The top 10% visit the site more than 100 times a month. One focus group girl admits she refreshes the site every 20 minutes. They arent always buying, of course, and that means Nasty Gals conversion rate (1%) is lower than a typical retailers. But because its in front of its customers so frequently it has a stunningly loyal group. Just over half of Nasty Gal sales come from 20% of its shoppers. This means theres room to grab lots more shoppers--hence the Nasty Gal label debuting in September.

Her success springs from a ludicrously simple premise. Says Amoruso: My philosophy is that you sell things for more than you bought them. Now shes being courted by several of Silicon Valleys top venture capital firms and Mark Zuckerbergs wealth managers. She raised $9 million earlier this year from Index Ventures, giving away just a sliver of equity, which instantly made Nasty Gal worth $130 million on paper. And the valuations being discussed now for an upcoming round of fundraising push her even higher.

IVE NEVER SEEN someone work for a salary, says Amoruso. Entrepreneurial blood courses through her Greek-American family. Her grandfathers ran a motel and a piano shop. Her father sold mortgage loans; her mother sold houses. Sophia started buying books on startups at age 9 and was president of her streets lemonade-and-abalone craft stand in Sacramento in the mid-1990s. But her charmed suburban life took a hit when Amoruso was 10 and both her parents lost their jobs. She remembers their cutting up credit cards to fill a nearly full jar of others at a credit office. Then they pulled her out of Catholic school to save money.

Soon her dad had her dangling out of his Jeep Cherokee at 6 a.m. delivering newspapers. It wasnt just the money she made that stuck with her. At age 15, while making sandwiches at a Subway shop, she obsessively counted out olives as her high-school-dropout co-workers snoozed. Her fathers advice: Show up. Dont stop moving. Sweep the floor even when they dont ask you to.

But Amoruso was restless. By the time she was 22 shed worked at ten retail jobs. On the strength of her photography she got into art school but grew bored. She had the nagging sense she was wasting her youth until vintage-clothing eBay sellers started friending her on MySpace. She was already scavenging her wardrobe staples at thrift stores and estate sales, then started browsing vintage seller sites--and realized she could do that, too, only better.

A rough-and-tumble education. Amoruso wasnt crazy about the fact that other eBay sellers were dinging her or that bids started so low. A Chanel jacket has a $9.99 opening price. It could sell for just that or for $1,000. You have to prove it is worth more, she explains. And she did, often buying an item on eBay then flipping it for three to five times as much. She made a virtue of the small visual thumbnails that eBay allowed for each item (the smallest real estate on the Web, she says): Her cute friends modeled garments, and she shot them artfully posed in front of her step-aunts garage door. She obsessed over her models poses, collars (punked to display architecture) and dresses (to show off a womans waist or a flowing fabric). She once sold a thrift-store neon checkered boys sweater for $550.

Amoruso also tried a controlled experiment. Selecting her best shots for eBay, she also posted them on MySpace to get a more qualitative feel. If the bids were lower than she expected and the comments on MySpace were negative (That model looks angry, for example), shed ditch the model and try to sell a similar item on someone new. When she wasnt fine-tuning online selling, she was trying to expand her reach with friend-finding software that instantly sent out friend requests to, say, friends of Nylon magazine (a fashion rag).

After a year and a half on eBay Amoruso had 30,000 friends on MySpace, was doing roughly $115,000 in sales and netting $20,000. By then shed moved the business from the cottage in back of her step-aunts house to a studio in Benecia, a San Francisco exurb.

But she was getting itchy again. Shed begun plugging a website called Nasty Gal. (The name comes from a song by Betty Davis, an ex-runway model and former wife of Miles Davis.) While it was then no more than a URL, she sent customers there in feedback e-mails, potentially transferring traffic out of eBay--a no-no other sellers complained about. They also accused her of shill bidding (she denies it).

In June 2008 she was kicked off eBay--exactly the push she needed to launch Nasty Gal as a vintage clothing destination weeks later. She ditched MySpace for Facebook, where she ran contests for $200 gift cards to get customers to upload photos of themselves in vintage meets runway looks.

She went up against the biggest online brands, offering free shipping on orders over $150 and couching all communication from the site as we even though she was a one-woman shop. Its the beauty of the Web, she says. You can pretend to be anything you want. But people figure out pretty quick if you dont live up to it.

THE TIPPING POINTS poured in, starting with a boost from fashion blog whowhatwear.com. A stylist for talk show host Kelly Ripa demanded an item just after it had sold out. When Amoru­so asked a girl in a New York City bar where shed found her jacket, the answer was Nasty Gal. My mom made me cancel my credit cards because of your website, the girl confided.

Amoruso made her first hire off Craigslist: Christina Ferrucci, a San Francisco shopgirl, who is still Nasty Gals top buyer. They experimented with nonvintage items mainly from Korean vendors who line Los Angeles Fashion District.

Inventory cleared so quickly that Amoruso was driving from Benecia to L.A. in a 1987 Volvo every other week. That fall the duo started buying at fashion trade shows, aiming to sell recognizable brands. One of their first big gets was shoemaker Sam Edelman. The company is picky about retail partners and said no. But when Amoruso returned an hour later she whipped out her iPhone to show the Nasty Gal home page. Her pitch: Well make your brand cooler.

In January 2011 Amoruso moved Nasty Gal to downtown L.A. to be closer to her merchants. She stayed thrifty. After a weeklong vacation in Hawaii, her first getaway since starting the company, she returned to a new office full of Aeron chairs worth $12,000. She was furious and sold them on Craigslist.

Last November Amoruso headed to Silicon Valley to meet with potential investors. Index Ventures--a backer of Facebook, Dropbox and online retail sites Etsy and ASOS--had called her in 2010, when Amoruso had no deck, no pitch. Now she was cocky: I make money, and I dont need money. But she did need help. Her warehouse manager quit abruptly on Black Friday, as a new inventory system rolled out. Thousands of orders poured in--for items out of stock. Other customers received the wrong stuff. All in all, Nasty Gal had to cancel 1,000 orders. Amoruso finally did a first round with Index in January.

She also combed LinkedIn for possible hires. Thats how she found a dozen top staffers. Amoruso has picked off people from the Gap, Urban Outfitters and Zappos.com.

To keep in touch with the fans, she encourages her staff to post about weekend getaway trips and makeup tips. (When one online fan suggested a model had plastic-surgery lips, creative director Joanna Ewing replied, No, we touched them. Theyre real.)

Though Amoruso stopped doing styling for daily model shoots, she cant stop meddling. When a wrap dress was getting just one sale a week, she insisted it be put on a popular model. The dress became a top seller at 400 buys a week.

Now her days are a jumble. One morning she selects models for a new magazine, Super Nasty. Next shes on the phone with Danny Rimer of Index discussing possible CFO and CTO hires. She talks to one lawyer about a new funding round, then to another about estate planning. Im 28, and I have to have a will, she says, musing that none of her friends has to plan that far out. I used to be spontaneous.

The Conversation

FORBES reporter Meghan Casserly on June 21 wrote:

Are we sick of daily deals?

Hukkster.com is a new site that pings you when items you want go on sale, putting ­control back in users hands. If you feel ­frustrated with deal overload, whats the best way for a retailer to reach you with discounts or new products? Texts? E-mail? Social?